EU increasingly takes on role of global antitrust enforcer

18 July 2017 1:59pm

7 July 2017. Natalie McNelis, Dafydd Nelson and Matthew Newman.

Not much gets by EU antitrust enforcers these days.

The European Commission is not only taking a hard line on violations of its core principles, such as abuse of dominance, cartels, tax evasion and contentious mergers.

It's also prepared to go to the mat over nitty-gritty transgressions. A case in point was EU antitrust chief Margrethe Vestager's press conference yesterday to announce three new statements of objections for procedural violations of the bloc's merger rules.

These latest moves show that the commission is increasingly assuming the responsibility of global antitrust enforcer.

With its 2.4 billion euro fine ($2.7 billion today) on Google last month for abusing its market power in Internet search, the least we can say is that the commission doesn't shy away from coming down hard on global companies.

But it's not just abuse of dominance. Last year, the EU regulator ordered Ireland to recover 13 billion euros in unpaid taxes from Apple, deeming it illegal state aid.

It didn't balk at blocking the Deutsche Börse-LSE merger, either, nor did it hesitate to press powerhouses Dow and DuPont about their merger's impact on innovation — something other antitrust enforcers have opted not to do.

And now the commission is stamping its authority on violations of its merger rules, though it hasn't yet used its ultimate sanction — revoking its authorization of a deal.

Yesterday, we saw the regulator issue three charge sheets to Merck KGaA and Sigma-Aldrich, General Electric and Canon for alleged breaches of the bloc's merger rules.

Allegations ranged from gun-jumping — implementing the merger before notifying it or getting authorization for it — to providing the commission with incorrect or misleading information in the context of the review.

Similar charges are outstanding against Dutch telecom company Altice for implementing its acquisition of PT Portugal without first obtaining the bloc's approval.

Fines can range from 1 percent, for violations such as providing faulty information, to 10 percent for gun-jumping.

And we've already seen that the rules have teeth: The commission fined Facebook 110 million euros in May for supplying misleading information during the regulator's review of its WhatsApp purchase in 2014.

In its dogged pursuit of such cases, the commission conveys that it intends to interpret, and enforce, its rules very strictly — and in every instance, even in cases where the harm done wasn't that serious.

Not in my warehouse

For an example of the EU regulator's pursuit of procedural cases, take yesterday's case against Canon for gun-jumping in its purchase of Toshiba Medical Systems.

The specific circumstances of the transaction — which involved a two-step process called "warehousing" — allowed the money to change hands quickly. This structure was chosen because Toshiba was facing a cash crunch following an accounting scandal last year.

According to the commission, this deal structure essentially allowed Canon to "acquire" the Toshiba unit prior to obtaining the relevant merger approvals.

Warehousing arrangements don't necessarily breach EU rules. But the commission has never been comfortable with deal structures like the one Canon and Toshiba cooked up, and said as much in its 2008 merger guidelines.

The commission thinks Canon's arrangements went beyond what is allowed — and it's calling the company out.

Detail as deterrent

The commission isn't the only regulator that found fault with the structure of the deal.

China's Ministry of Commerce and Japan's Fair Trade Commission also objected.

But the moderate measures they took in response — a nominal fine of about $44,000 from China, a warning from Japan — are hardly deterrent.

If the commission wants to stop companies from devising such creative work arounds in the future, it may think a heftier fine is necessary.

And taking a hard line — even with nitty-gritty technical details — signals that the EU intends to stand firm in every aspect of antitrust enforcement.

Companies, take note.

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